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Tag: Class Action

7th Circuit Rejects Plaintiff’s FDCPA Claim For Listing Two Creditors

Steven Uhrich

Link: Dennis v. Niagara Credit Solutions, Inc., No. 19-1654 (7th Cir. 2019)

The Seventh Circuit rejected an appeal seeking to overturn a decision by Richard L. Young of the Southern District of Indiana. Judge Young dismissed plaintiff’s claim via judgment on the pleadings.

Plaintiff filed suit alleging that the defendants violated § 1692g(a)(2) of the FDCPA by “fail[ing] to identify clearly and effectively the name of the creditor to whom the debt was owed:”

“Listing two separate entities as “creditor” — one of them a debt buyer, which would likely be unknown to the consumer — and not explaining the difference between those two creditors, then stating that Niagara was authorized to make settlement offers on behalf of an unknown client — could very likely confuse a significant portion of consumers who received the letter as to whom the debt was then owed.”

Since the standard of review is de novo, the panel dove into its own analysis of the claim and agreed with the district court:

This is a meritless claim. In Smith, the original and current creditors were the same. In this case, where a consumer’s debt has been sold, it is helpful to identify the original creditor (which the customer is likely to recognize as he had done business with them in the past) and the current creditor (which the customer may not recognize, and which the FDCPA requires the letter to identify). An unsophisticated consumer will understand that his debt has been purchased by the current creditor—an example of the type of “basic inference” we believe such consumers are able to make. The defendants’ letter thus “provides clarity for consumers; it is not abusive or unfair and does not violate § 1692g(a)(2).” Smith, 926 F.3d at 381.

The case was argued by David Philipps and Boyd Gentry.

7th Circuit: No Harm No Foul on FDCPA Claim

Steven Uhrich

Link: Casillas v. Madison Ave. Associates, Inc., 926 F. 3d 329 (7th. Cir. 2019)

Plaintiff, represented by the law firms Philipps & Philipps and Berger Montague, brought a claim under the Fair Debt Collection Practices Act 15 U.S.C. § 1692g(a). Since the decision creates a circuit split, the opinion was circulated but a majority did not favor a rehearing en banc. Chief Judge Wood, joined by Circuit Judges Rovner and Hamilton, filed a dissent from the denial of rehearing en banc.

The Court briefly described the claim before finding it insufficient under the 7th Circuit’s prior Article III standing analysis in Groshek v. Time Warner Cable, Inc., 865 F.3d 884 (7th Cir. 2017):

[A] notice must include, among other things, a description of two mechanisms that the debtor can use to verify her debt. First, a consumer can notify the debt collector “in writing” that she disputes all or part of the debt, which obligates the debt collector to obtain verification of the debt and mail a copy to the debtor. Id. § 1692g(a)(4). A failure to dispute the debt within 30 days means that the debt collector will assume that the debt is valid. Id. § 1692g(a)(3). Second, a consumer can make a “written request” that the debt collector provide her with the name and address of the original creditor, which the debt collector must do if a different creditor currently holds the debt. Id. § 1692g(a)(5). Madison’s notice conveyed all of that information, except that it neglected to specify that Casillas’s notification or request under those provisions must be in writing.

The only harm that Casillas claimed to have suffered, however, was the receipt of an incomplete letter—and that is insufficient to establish federal jurisdiction. As the Supreme Court emphasized in Spokeo, Inc. v. Robins, Casillas cannot claim “a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” ___ U.S. ___, 136 S.Ct. 1540, 1549, 194 L.Ed.2d 635 (2016). Article III grants federal courts the power to redress harms that defendants cause plaintiffs, not a freewheeling power to hold defendants accountable for legal infractions. Because Madison’s violation of the statute did not harm Casillas, there is no injury for a federal court to redress. (Emphasis added).

The panel ( Sykes and Barrett, Circuit Judges, and Durkin, District Judge) emphasized that they were disagreeing with the recent 6th Circuit Macy case:

Casillas’s best case is from the Sixth Circuit, which sees things differently than we do. In Macy v. GC Services Limited Partnership, the defendant violated the very same requirements that Madison did here: it failed to notify the plaintiffs that they had to dispute their debts in writing to trigger the protections of the Fair Debt Collection Practices Act. 897 F.3d 747, 751 (6th Cir. 2018). Like Casillas, the plaintiffs did not allege that they tried or had any intention of trying to contact the debt collector to verify the debt. Id. at 758. Instead, they claimed that not knowing about the writing requirement “could lead the least-sophisticated consumer to waive or otherwise not properly vindicate her rights under the [Act].” Id. The Sixth Circuit held that the plaintiffs had alleged a concrete injury because “[w]ithout the information about the in-writing requirement, Plaintiffs were placed at a materially greater risk of falling victim to `abusive debt collection practices.'” Id. (quoting 15 U.S.C. § 1692(e)).

Judge Wood had two major objections, one procedural and one substantive.:

 In demanding proof of injury, we need to guard against pushing a merits judgment into the Article III injury-in-fact inquiry; we also need to ensure that we are not, de facto, demanding fact pleading. The Supreme Court under-scored the standing/merits distinction in Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014), in which it took care to distinguish between an adequate allegation of injury-in-fact for standing purposes and the question whether that asserted injury fell within the scope of the statute on which the plaintiff was relying (there, the Lanham Act). Id. at 125-28, 134 S.Ct. 1377. It is possible to point to a real injury (and thus pass the Article III hurdle) but still lose on the merits for failing to state a claim on which relief can be granted. See FED. R. CIV. P. 12(b)(6).
We additionally need to be sure that we are not returning to a fact pleading regime, as it is not required or even acceptable under Federal Rule of Civil Procedure 8(a)(2) and it is not specifically required under this Act. We repeatedly have stressed that the Federal Rules of Civil Procedure use a notice-pleading standard, not a fact-pleading standard. A complaint need not include allegations about every element of a claim, as long as it meets the plausibility standard established in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

As for the substantive issue, she felt the panel got it dead wrong:

[P]eople might not appreciate the need for a written record of their dealings with the debt collector and thus without a reminder that they must reduce their concerns to writing, they are likely to forfeit the important substantive rights the Act provides for them. When they receive a letter, they are often encouraged to call a 1-800 telephone number. But someone who responds to a debt-collection letter in that way will be put into a “Gotcha!” situation. No notification in writing equals greatly diminished protection under the Act.
It is a fair inference from Casillas’s complaint that Madison’s omissions at a minimum put her in imminent risk of losing the many protections in the Act that are designed to regulate the debt-collection process as it goes forward. The right to verification, the right to have the name and address of the original creditor, the right to cessation of debt-collection activities, and others, are far from bare procedural protections—they are protections that serve as the gateway to the Act’s substantive regime.

I am no fortune teller, but something tells me this split will end up before the Supreme Court sooner or later. Stay tuned.

7th. Cir.: Online Estimates From Zillow and Redfin Not Actionable

Steven Uhrich

Link: Patel v. Zillow, Inc., No. 18-2130 (7th Cir. 2019).

The 7th Circuit affirmed two decisions from the Northern District of Illinois, confirming that a disgruntled property owner can’t sue Zillow (and likley similar sites like Redfin or Trulia) for the low “Zestimate” on its website. Plaintiff, on behalf of the class, alleged it was not licensed to issue appraisals and that its activity violated the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS §§ 510/1 to 510/7.

The court confirmed that the licensing statute at issue (  Illinois Real Estate Appraiser Licensing Act, 225 ILCS 458/1 to 458/999-99) does not confer a private right of action, and that as for the IUDTPA claim, that

the district judge was right to observe that the statute deals with statements of fact, while Zestimates are opinions, which canonically are not actionable. See, e.g., Sampen v. Dabrowski, 222 Ill. App. 3d 918, 924-25 (1st Dist. 1991) (where a valuation is explicitly labeled an estimate, there is no deception)…

FDCPA Overshadowing Claim Rejected

Steven Uhrich

Link: NADBORSKI v. RECEIVABLE MANAGEMENT SERVICE CORPORATION (N.D. Ill. Nov. 8, 2018).

Plaintiff, represented by the Consumer Law Center, P.C., filed a class action alleging that the following language overshadowed the debtor’s rights under 1692g:


This is a request for payment of this account which has been placed by VONAGE for collection. Please remit your payment to the address above.
If you have not been contacted by an RMS representative, you will be receiving a call to bring this matter to a resolution. Should you receive this letter after a discussion with our representative, we thank you for your cooperation.

The Court, Ronald A. Guzman, disagreed:


Plaintiff’s assertion that the letter’s statement that he would be receiving a call contradicts the 30-day verification notice is just the type of idiosyncratic and unreasonable interpretation that the Seventh Circuit has stated is not violative of the FDCPA. Even an unsophisticated consumer, as defined above, would not believe that the promised phone call to attempt to resolve the matter somehow cancels out his right to seek verification of the debt.

. . .


According to Plaintiff, the letter is further confusing and overshadows his rights because RMS’s request that the consumer include the claim number in all communications[1]“contradicts the fact that a consumer does not need to provide specific information or wording in order to dispute a debt.” (Pl.’s Resp., Dkt. # 24, at 5.) This contention verges on the ridiculous.

Class Cert Denied Based on Defense to Rep’s Claim

Steven Uhrich

Link: Heisler v. CONVERGENT HEALTHCARE RECOVERIES, INC. (E.D. Wisc., Sept. 27, 2018).

In an FDCPA lawsuit brought by Edelman Combs Latturner & Goodwin LLC, a district court found that because a class representative was arguably subject to a defense of judicial estoppel—and some unnamed class members were not—that he’s not an adequate class representative under Rule 23.


Again, CHRI argues that Heisler’s cause of action should be barred by judicial estoppel based on actions taken during the course of Heisler’s bankruptcy proceedings. Heisler disputes that judicial estoppel applies in his case and raises both factual and legal arguments in support of his position. This judicial estoppel argument is both legally and factually specific to Heisler and his bankruptcy proceedings. Thus, I find that CHRI has presented at least an “arguable” defense to Heisler’s claim and therefore conclude that Heisler is an inadequate representative of the class. See Randall v. Rolls-Royce Corp., 637 F.3d 818, 824 (7th Cir. 2011) (“[N]amed plaintiffs who are subject to a defense that would not defeat unnamed class members are not adequate class representatives.”); see also Boyd v. Meriter Health Servs. Employee Ret. Plan, No. 10-CV-426-WMC, 2012 WL 12995302, at *11 (W.D. Wis. Feb. 17, 2012), aff’d sub nom. Johnson v. Meriter Health Servs. Employee Ret. Plan, 702 F.3d 364 (7th Cir. 2012) (finding the court was “compelled to conclude” the named plaintiff was an inadequate class representative when defendants alleged judicial estoppel due to plaintiff’s failure to disclose cause of action during banrkutpcy proceedings).

7th Circuit Denies Debt Collector’s Bid For Arbitration

Steven Uhrich

Link: Smith v. GC Services Limited Partnership, No. 18-1361 (7th Cir. 2018).

In an FDCPA case filed by Philipps & Philipps, Ltd., in July 2016, the defendants waited to demand arbitration until March of 2017—but filed nothing with the court. It wasn’t until August of 2017, once the class had been certified and another motion to dismiss denied, that the defendants brought their motion to compel arbitration.

The District Court for Southern District of Indiana held that the arbitration clause could not be invoked by GC Services based on an agency theory or equitable estoppel, and that in any event GC Services had waived its right to invoke the clause by waiting so long to bring it to the court’s attention.

The Seventh Circuit affirmed:

Smith does not contend that GC Services expressly waived any right to arbitrate. The question is whether we should infer that forfeiture occurred, which requires us to “determine that, considering the totality of the circumstances, a party acted inconsistently with the right to arbitrate.”

The panel went on to find that GC Services did not act diligently because the company did not mention the arbitration agreement in its answer, provided an inadequate explanation for the five-month delay in seeking arbitration after learning of the agreement, and prejudiced Smith by (unsuccessfully) engaging in motions practice.

The panel also found that this would prejudice the Plaintiff since he had already obtained victory on legal points and that allowing arbitration would undo those victories:

“GC Services’ motion to dismiss framed an integral—perhaps dispositive—issue: whether 15 U.S.C. § 1692g(a)(3) requires that debts be disputed in writing. The Third Circuit has held that a written dispute is required; the Second, Fourth, and Ninth Circuits have held that no writing requirement exists. Compare Graziano v. Harrison, 950 F.2d 107, 112 (3d Cir. 1991), with Clark, 741 F.3d at 490-91; Hooks v. Forman, Holt, Eliades & Ravin, LLC, 717 F.3d 282, 285-87 (2d Cir. 2013); Camacho v. Bridgeport Fin., Inc., 430 F.3d 1078, 1080-82 (9th Cir. 2005). District courts within the Seventh Circuit have decided the issue both ways. See, e.g., Jolly v. Shapiro, 237 F. Supp. 2d 888, 895 (N.D. Ill. 2002) (finding a writing requirement); Campbell v. Hall, 624 F. Supp. 2d 991, 1000 (N.D. Ind. 2009) (finding no writing requirement) . . .

“[T]he district court’s determination that Smith was prejudiced when GC Services sought arbitration after Smith had defeated a motion to dismiss, obtained class certification, and litigated several discovery issues was not erroneous. In essence, GC Services sought to erase Smith’s successes—including her victory on the pivotal legal issue of whether § 1692g(a)(3) contains a writing requirement . . . “

The Court concluded with an apt warning to defense counsel in other cases:

This attempt to “play heads I win, tails you lose” is “the worst possible reason for delay.” Cabinetree, 50 F.3d at 391. 

Potential For MDL Not Reason to Delay Certifying FDCPA Class

Steven Uhrich

Link: Rhodes v. ENHANCED RECOVERY COMPANY, LLC, Dist. Court, SD Indiana 2018 (Oct. 19, 2018)

A class was certified in an FDCPA case brought by Philipps and Philipps, Ltd. despite Defendant’s assertions that a heightened ascertainability standard should apply and that a potential consolidation into MDL on a bona fide error defense issue should warrant a stay of that decision.

“Defendant has indicated in its response in opposition to Plaintiff’s class certification motion that it intends to apply to the Multi District Litigation Panel to have this case and four other unidentified cases joined for purposes of conducting discovery regarding a potential bona fide error defense and argues without further explanation that “it would be more appropriate to consider the issue of class certification after Defendant makes its application to the MDL Panel.” Def.’s Resp. at 2. We are not persuaded that Defendant’s potential application to the MDL Panel is an adequate basis on which to delay a ruling on Plaintiff’s motion for class certification.”

The opinion was issued by judge Sarah Barker.

Demanding “Pre-Purchase” Interest Not Valid Under FDCPA

Steven Uhrich

Link: Gomez V. Cavalry Portfolio Services, LLC, Case No. 14-cv-09420 (N.D. Ill Sept. 24, 2018).

Plaintiffs had Bank of America (“BOA”) credit cards that were delinquent and charged off in 2009. BOA did not compute or track interest on an account after it was charged off. BOA also did not send regular billing statements to holders of charged-off accounts. Two years after BOA charged off Plaintiffs’ account, BOA sold the account to Cavalry SPV, which immediately assigned it to Cavalry Portfolio Services, LLC for servicing and collection.

Plaintiffs, through his counsel Edelman, Combs, Latturner & Goodwin LLC, filed a class action lawsuit under the Fair Debt Collection Practices Act alleging that defendants computed and added post-charge-off, pre-purchase interest to the account—basically, that it added two years’ worth of interest that BOA had not computed or tracked while it held the debt.  Plaintiffs alleged that Defendants violated the FDCPA by adding interest to credit card debts after the assignor bank had waived that interest. Both parties filed cross motions for summary judgment.

Plaintiffs argued that (1) BOA waived its right to collect post-charge-off, pre-sale interest, (2) this waiver barred Defendants from imposing post-charge-off, pre-sale interest, and (3) Cavalry violated the FDCPA by adding post-charge-off, pre-sale interest, thereby misrepresenting the amount Plaintiff owed.

Defendants argued that (1) Cavalry SPV is not a debt collector, (2) Plaintiffs’ claim is barred by the statute of limitations, and (3) the response letter is not a collection communication.

Judge Andrea R. Wood entered summary judgment in favor of defendant because it was not filed within the one-year statute of limitations period for FDCPA claims. The court also held, somewhat ironically, that Defendant waived its argument regarding choice-of-law analysis as to the waiver issue (Defendant didn’t want Illinois law to apply). Under that analysis, judge Wood found that:

the fact that BOA chose not to charge interest for two years (and it consciously made that decision as part of a broader policy) indicates that it intended to waive its right to collect this post-charge-off interest retroactively. BOA’s implied waiver of the right to charge interest on Plaintiffs’ account retroactively is further evidenced by the fact that BOA did not send periodic account statements to Plaintiffs.

It thus appears the merits of the suit would likely have supported summary judgment had the statute of limitations been met.

 

FDCPA Claim for Failure to ID “Current Creditor” Tossed Out

Steven Uhrich

Link: Smith v. Simm Associates, Inc., Case No. 17-C-769 (E.D. Wisc., Sept. 30, 2018).

A class action case brought by Edelman Combs Latturner & Goodwin LLC was thrown at at summary judgment by judge William C. Griesbach. The plaintiff alleged that the collection letters sent out by the defendant violated  § 1692g(a) by:

Smith alleges that Simm violated §§ 1692g(a)(2) and 1692e of the FDCPA by failing to identify Comenity as the “current creditor” in its letter, instead of as the “original creditor.” Although Comenity was both the original and the current creditor, Smith claims that the letter nevertheless violated § 1692g(a)(2) by failing to also expressly identify Comenity as the “current creditor.”

The court found that:

There was nothing abusive, unfair, or deceptive about Simm’s notice to Smith about her outstanding debt. The letter contained the name of the creditor to whom the debt was owed, and offered payment arrangements authorized by PayPal Credit, the name Smith was most likely to recognize as the source of the debt. I therefore conclude that Simm did not violate § 1692g.

Failure to ID Creditor Suffices Spokeo Standard

Steven Uhrich

Link: Heisler v. Convergent Healthcare Recoveries, Inc., Case No. 16-CV-1344 (E.D. Wisc., Sept. 27, 2018).

Plaintiff filed suit alleging that the dunning letters sent by CHRI did not identify the original creditor in violation of the Fair Debt Collection Practices Act, 15 U.S.C. 1692g.

The court provides a great analysis of the FDCPA for purposes of Article III standing analysis post-Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).

Heisler alleges that CHRI violated his rights under the FDCPA by failing to identify the creditor to whom the debt was owed and by using false, deceptive, and misleading representations or means in connection with the collection of the debt. (Compl. ¶ 46.) As in Pogorzelski, Heisler’s allegations that the debt collection letter sent by CHRI failed to identify the creditor of the debt in violation of his rights under the FDCPA sufficiently pleads a concrete injury-in-fact for purposes of standing. As to CHRI’s allegation that Heisler never opened the letter, this fact is irrelevant as Heisler seeks statutory damages, “a penalty that does not depend on proof that the recipient of the letter was misled.” See Bartlett v. Heibl, 128 F.3d 497, 499 (7th Cir. 1997). Thus, I find that Heisler has standing to sue in this case.

Unfortunately for Plaintiffs represented by Edelman, Combs, Latturner & Goodwin, judge Nancy Joseph also denied class certification because there is a unique defense that Plaintiff’s cause of action should be barred by judicial estoppel based on actions taken during the course of Plaintiff’s bankruptcy proceedings.